- The Washington Times - Sunday, September 12, 2004

John Zarocostas recently interviewed Guy Standing, director of the International Labor Organization’s Socio-Economic Security Program, in Geneva for The Washington Times.

Mr. Standing, 56, has a doctorate in labor economics from Cambridge University in England. He is the lead author of the ILO’s four-year study “Economic Security for a Better World,” which surveyed 48,000 workers and 10,000 enterprises and found that most of the workers suffer from increased insecurity and work-related stress. The ILO said the current social structures in many of the 90 countries examined are failing badly.

Question: Dr. Standing, what is the thrust of the report?

Answer: We wanted to look at the nature of worker insecurity and the policies that were having an effect on insecurity. First thing we did was defining insecurity in terms of seven elements:

1. Income security, which means not only stable income on which to live, but stable income and a reasonable expectation of a secure income into old age.

2. Labor-market security, which means the existence of good employment and income-earning opportunities.

3. Employment security — protection against arbitrary loss of employment, and compensation for unfair dismissal.

4. The need to have a niche in the workplace, a sense of upward mobility, a sense of career.

5. Skills security, which means people must have access to a possibility of training and retraining.

6. Work security, which means safe working conditions and mechanisms of protecting people in the workplace against injuries, illness and important new things such as stress.

7. Representation security, which means, at both the individual and collective level, having the means to protect the interests of all groups in society.

We give highest priority to income security and representation security. That means everybody needs a guaranteed minimum income sufficient to survive.

Q: Three-quarters of the world’s working population is extremely insecure. Is that because of globalization and deindustrialization in rich countries?

A: Our index shows that a very small number of countries are what we call pacesetters — those countries that score high on our index. … They have good institutions, and they have good outcomes.

And there are others ranked in the bottom cluster, which is the much-to-be-done cluster, which have poor policies, poor institutions and poor outcomes.

What we find is that only 8 percent of the world lives in societies that are pacesetters, that have high levels of economic security, whereas 73 percent of the world lives in countries where there is a low level of economic security.

What we’ve done then is look at the factors that explain the growth in insecurity. This is very important, because what we’ve looked at is the old types of social protection systems and regulation systems and income-redistribution systems, and we found that they are breaking down.

Q: Why is that?

A: Because they were for societies that were closed and grew up in the middle of the 20th century, and the welfare state was for societies that actually traded with other countries with similar [levels] of labor rights and labor standards and labor costs.

In an open economic system, what’s happened is … much more fluidity.

Country after country has tried to become “more competitive,” has changed its regulations, changed its social security and so on, and in doing so has allowed for more insecurities in the labor market, more insecurities in terms of social-security systems not reaching larger and larger numbers of people.

You’ve had an unraveling of the old welfare state, and we are now in the midst of a great transformation in the world, and that transformation is where the economic system and the dynamics of it have changed — and the mechanisms of social protection and regulation, redistribution, have not changed in order to combat the growing insecurities.

In the report, we document not only the factors that we see as contributing to this, but also give evidence to show this is the case.

Q: Sweden is ranked No. 1 in the economic security index, and the United States is 25th. Why is that?

A: The countries that are the pacesetters are those countries that do well in all seven dimensions of economic security, and it turns out the Scandinavian countries, in general, have a more coherent, relatively high level in all seven dimensions.

Most other countries do well in some respects and badly in others. Some do very badly in all respects.

The key thing about the U.S. is there are two areas of economic security where the country does not score high by international standards. One is on employment security. The hire-and-fire culture, more “flexible” labor markets, means in fact that there is little strength of employment protection. You, as an observer, may say that is not very important; others may say that it is very important. But clearly, the U.S. does less well in that regard than many European countries.

And the second area where the United States does not score as high as many European countries is in representation security. As we know, there has been a strong de-unionization in the U.S., a very low level of private-sector unionization, and there are not strong alternative collective organizations representing the interests of workers.

Q: The financial crises of the 1990s devastated many Asian economies, but insecurity is continuing to rise, as shown by the high levels of insecurity felt by the average Chinese worker, despite the country’s wave of economic dynamism. What’s behind this?

A: It is absolutely true that the growth of economic insecurity is greatest in the transition countries. This is not to defend what existed beforehand.

Q: You mean the ex-communist countries?

A: The ex-communist countries that are moving from a state system to a market system.

There, the shock therapies and “structural adjustment” policies that were pursued in the 1990s led to huge plunges in income; a growth in labor surplus; large numbers of workers being put on unpaid leave, not being paid their wages and losing access to benefits.

And the state has not emerged to fill the gap that was left by that. There was a huge drop in life expectancy in Russia and other parts of Eastern Europe.

By contrast, in the Asian economies, with the big Asian crises in 1997-98, yes, there was a big plunge. But there was not that huge drop in life expectancy that occurred in Eastern Europe: The system absorbed the suffering.

And as a consequence, you can see the support systems in Asian societies managed to help people get through the crisis.

Q: Through the extended-family structure?

A: Through the extended family, community systems of support, the informal links between rural and urban areas and so on. There’s a big “but” there.

The big “but” is that many of those countries are rushing toward being more individualistic, more market-oriented, and the ability of the extended-family systems to provide support is getting worse. … Now China should be taken separately, because China is a mix [compared with] other Asian countries with extended networks and moving from a state system to a more market system.

But rapidity of economic growth means that the potential for economic security is there. But in moving from a state system to a market system, a huge number — many millions of workers — are being very severely hit by losing their jobs, losing their incomes and being put in labor-surplus conditions — often not revealed in the unemployment rates, because they are still attached to a state enterprise.

This affects millions of people without adequate income from their earnings, but [who have] adequate social protection. The challenge for the Chinese at this stage is to introduce a comprehensive system of social protection to go with the market reforms that are taking place.

Q: The report indicates that Chinese authorities may be dramatically underestimating the levels of unemployment, and that the real rate could be double — or more above the official rate of around 3 percent. What’s this due to?

A: The dynamics of what’s taking place [in China] is in many respects unique.

There is deindustrialization in China, as there is in most parts of the world — in the sense that manufacturing jobs are not growing, and in many areas are shrinking — and yet in the United States and in a lot of other places, there’s this image that it [China] is sucking all the manufacturing jobs from the U.S. and Europe.

This is not a fair way of [looking at this]. Certainly, the value added in manufacturing is going up, but there’s a tremendous shedding of jobs in the manufacturing sector.

Q: Any idea how many millions?

A: Well, we don’t really have a total figure on the millions, but we’re talking about many millions. And we estimate that the actual level of unemployment is probably double what the official rate is.

The main reason is the huge numbers put on unpaid leave, or partially paid a minimum. They’re paid a minimum but they’re not really employed, and they’re expected to move out into the market economy — but there are not enough jobs to absorb them.

The problem is, they are not measured as unemployed, but in practice they are, and in need of support to get them through a period of unemployment.

Q: The report puts the spotlight on the high levels of economic insecurity felt by the elderly and gives startling double-digit figures for some advanced countries like the United States and Australia. What do you attribute this to?

A: There’s no question that old-age insecurity is one of the major issues in this whole concern about economic security.

Wherever you go, you find big numbers of young and middle-aged people expecting to be poor in their old age. And in many transition countries and developing countries, you’ll find more than three-quarters of people expect to be poor when they’re old-aged. That’s a terrifying situation.

So that means that even people who are not poor now anticipate being poor when they get old. But we also see that old-age poverty rates in the rich countries are high and, in more countries than not, have actually risen in recent years.

We find, for example, that in the 27 industrialized countries for which we have data, the old-age poverty rate has risen in 18 and fallen in nine. So in two-thirds of the countries, the old-age poverty rate has been rising.

Even worse, in a large number [of countries], the chronic poverty rate among the elderly has risen. That means the people are receiving less than 40 percent of the average income in their society. So you’ve got a huge problem.

Now, among the causes is the changing nature of pension systems. If you move away from a defined benefits to a defined contribution [system] for your pensions, and toward individual retirement accounts … there is a tendency for more privileged groups of workers to get better pensions.

So you get a situation where a large proportion of workers lack entitlement to a decent pension. This also means the more vulnerable groups of workers are less insurable.

In addition, we find that governments in Europe, North America and other rich countries have been modifying their pension systems to raise the age of entitlement, lower the value of a state pension, increase the number of years of contributions that you have to make in order to get a full pension and a number of other changes that have tended to mean you have a more stratified pension system.

Q: The survey tapped over 10,000 employers worldwide and found that workers who were better looked after had higher productivity levels. Is that accurate?

A: We visited 10,000 factories, interviewed the managements in those factories at great length and we looked at the various elements of work force security, as defined. We measured those firms that provided their work force with high levels of economic security and those that provided lower levels in all the various components.

What we found is that those firms that provide high levels of economic security for their work force do as well, or better than, those firms that do not.

Q: Those with higher skills, says the study, are not necessarily happy with their careers, and it argues that work-related stress seems to be a global phenomenon now — linked, in some societies, with high levels of suicide. Is that a surprise?

A: You have put your finger on a very important set of concerns.

In our surveys, we find a large number of our respondents posses skills that are not being used in their work. … A lot of people who are highly skilled, highly qualified, but who have to do boring jobs, or jobs much lower than their level of qualifications, have a greater sense of frustration, a greater sense of wasting their time and greater stress.

What we find is that with all the emphasis on competitiveness and flexibility and informality of work, the amount of stress, some self-induced, some induced by labor intensification, is a major modern phenomenon.

The worst symptoms at the moment are found in Japan, with the phenomenon of “karoshi” — working oneself to death — which recent figures suggest is increasing in Japan.

But you also see many other symptoms in other industrialized countries, including the phenomenon of “presentism,” the opposite of absenteeism — with more and more people staying on their job when it would be better to take time off.

Q: How can poor countries create better social systems?

A: We believe [in] a universal-rights-based approach. …

Evidence from our surveys in Africa and Asia show that targeted “safety net” schemes are less likely to reach the poor than the non-poor. Schemes that do not apply complex administrative tests and entitlements are not only more equitable, but are affordable and would help to improve productivity and induce greater social responsibility.

Q: Finally, what did your study reveal about sex inequality?

A: We find that women are not only discriminated against more in terms of inequality in wages, but also face more irregularity in earnings and are less likely to receive benefits such as sick pay and pensions.

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